1. All of the following statements about externalities are true EXCEPT:

a. An externality is a cost or benefit that is not transmitted through prices and is incurred by a party who was not involved as either a buyer or seller of the goods or services.

b. The cost of an externality is a negative externality, or external cost.

c. The benefit of an externality is a positive externality, or external benefit.

d. Negative externalities are often associated with the free rider problem.

e. Positive externalities are often associated with the free rider problem. For example, individuals who are vaccinated reduce the risk of contracting the relevant disease for all others around them, and at high levels of vaccination, society may receive large health and welfare benefits. Conversely, any one individual can refuse vaccination, still avoiding the disease by "free riding" on the costs borne by others.